WORLD TRADE  
ORGANIZATION   
G/SCM/Q2/KOR/41 
15 June 2011 
 (11-2935) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions from INDIA1 Regarding the New and Full 
Notification of the REPUBLIC OF KOREA2 
   The following communication, dated 10 June 2011,  is being circulated at the request of the 
Delegation of the Republic of Korea. 
 
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 FISHERY 
Question 1 
  Whether Korea provides any subsidy for infrastructure support (Port development) 
under the programme of support for development of deep-sea fishery? 
 Reply 
 
 Korea does not provide subsidy for infrastructure support under the Programme of Support 
for development of deep-sea fishery.  
Question 2 
  How does Korea ensure that the policy objective of "Stable Production and 
Management of Deep-Sea Fishery" is achieved through the grants provided? 
 
Reply 
 
 Under the program, the Korean government provide s fishermen with loans at a lower interest 
rate.  Fishermen usually have difficulty in keep ing stable fishing activities due to the inherent 
seasonality and fluctuation of the fisheries industry.   The program helps fishermen maintain stable 
fishing activities. 
 
Question 3  
 Whether the subsidy relating to deep-sea fi shery is utilized for vessel construction and 
other infrastructure support? 
                                                      
1 G/SCM/Q2/KOR/40. 
2 G/SCM/N/186/KOR. G/SCM/Q2/KOR/41 
Page 2  
 
  Reply 
 
 The subsidy relating to deep-sea fishery in Kor ea is not utilized for infrastructure support. For 
vessel construction, Korea had the Programme of Support for Old Fishing Vessel Replacement, which 
is explained in detail in G/SCM/N/186/KOR.  
 
Question 4  
 In respect of the programme for support for fish products processing development 
(a) how the entities benefiting from the subsidies are identified and (b) what is the impact of the subsidy (through grants and loans) on exports from Korea? 
 
Reply 
 
 "The Programme of Support for Fish Products  Processing Development" is for unspecified 
individuals.  The beneficiary of the Programme is selected through a process of publishing notice and 
reviewing applications. The requirements and conditi ons for application of the Programme are also 
published in the notice.   As for the impact of the support on exports, it is not possible to measure the impact because 
the program is not export-conditioned.  Rather, the im pact on exports, if any, is likely to be minimal 
because most beneficiaries operate a small scale busin ess and most of their products are consumed in 
domestic markets.  
Question 5 
 
 In respect of the programme for support for fishing activities what is the nature of "Fishing Activity" that avails of subsidy and the impact of the same on export? 
 
Reply 
 
 "Fishing activities" that avail of "the Progra mme of Support for Fishing Activities" are fishing 
activities of a fisherman who has a fishing license, permit, experimental fishing permit or fishing 
rights of the reported fishery, in accordance with fi sheries laws and regulations, and who engages in 
capturing fish and aquaculture in the inland, coastal  and off-shore waters. The scope of application of 
the Programme is not limited to a specific fishery.   As for the impact of the support on exports, it is not possible to measure the impact because 
the program is not export-conditioned.  Rather, the impact on exports, if any, is likely to be minimal 
because most beneficiaries operate a small scale busin ess and most of their products are consumed in 
domestic markets.  
Question 6 
 
 In respect of programme for support for ol d fishing vessel and equipments replacement, 
how does Korea identify the fishermen eligible for subsidy?  Does this subsidy result only in 
"replacement of old vessels" or does it have an  impact on any increase in the number of fishing 
vessels? 
  G/SCM/Q2/KOR/41 
 Page 3 
 
 
  Reply 
 
 Under the Programme of Support for Old Fish ing Vessel Replacement, a fisherman with a 
licensed fishing vessel submits an application to the government and the government reviews it and 
decides on the eligibility of the a pplicants in accordance with the detailed guidelines which set terms 
and conditions for the Programme.  
 
 In respect of the number of fishing vessels, th e program does not contribute to increase in the 
total number of fishing vessels because the old fishing vessels are replaced with new vessels. 
 
COAL INDUSTRY 
 Support for the Coal Industry through the special account for energy and resouces. 
 
Question 1 
  Whether the impact of the subsidy in pricing of fuel has been assessed? 
 
Reply 
 
 The impact of the subsidy in pricing of fuel has not been assessed yet. 
 
Question 2  
 What are effects of subsidization of coal industry on downstream industrial and 
commercial users?  Whether this effect can be quantified at different stages of industrial and 
commercial users? 
 
Reply 
 
 It is assessed that the coal industry subsidization helps the coal industry remain viable while 
maintaining the minimum price for briquette, by en suring coal supply to meet domestic coal demand. 
This, in turn, ensures a stable supply of affordab le fuel and a stable business environment for coal 
mines and briquette manufacturers. Therefore, the coal subsidy can be assessed to contribute to the employment in the related industries and local ec onomies. However, it is difficult to quantify the 
effect of the subsidy. 
 
MANUFACTURING  INDUSTRY  
 Support for Foreign Invested Enterprises. 
 
Question 1 
 
 What are the eligibility criteria for suppo rt for foreign invested enterprises as 
mentioned in V.A.1 of Korea's notification?  
Reply 
 
1. Tax Reduction.  
- Individual-type foreign investment zones:  Tenant foreign invested companies. G/SCM/Q2/KOR/41 
Page 4  
 
  - Complex-type foreign investment zones,  free trade zones, free economic zones: 
tenant foreign investment compani es with investment not less than 
10 million dollars.  
2. Cash Grant. 
 When any foreign national makes a foreign inv estment (with 30 per cent or more of an FDI), 
the state and local administrative units may furnish the foreign national with cash funding required for 
the purposes, including the construction of new fact ories, which are prescribed by the Enforcement 
Decree. Such support should, however, take into acc ount whether the relevant foreign investment is 
accompanied by high technology; the effect of the technology transfer; the size of job creation; whether the foreign investment overlaps with any do mestic investment; the propriety of the location 
in which the foreign investment is made, etc. 
 
Question 2   What are the criteria and conditions for loca ting an industry in the Foreign Investment 
Zone, Free Economic Zone and Free Trade Zone?  
Reply 
 
1. Foreign Investment Zone. 
 FIZs are areas designated to attract foreign investment, and are largely categorized into 
complex-type FIZs and individual type FIZs. A co mplex-type FIZ is an area designated within a 
national or regional industrial complex for small and mid-sized foreign invested companies, while an individual-type FIZ is an area designated based on th e preference of a foreign investor in order to 
attract large-sized foreign invested companies.  
 
 If the criteria for FIZ designation (Table 1) are satisfied, the FIZ designation is decided after 
working-level discussions and a review by the foreign investment committee. In order to move into an 
FIZ, a company should satisfy certain conditions – for example, a company’s FDI ratio should be not 
less than 30 per cent.   G/SCM/Q2/KOR/41 
 Page 5 
 
 
   
Table 1.  Criteria for FIZ designation & location 
Type Criteria for designation Criteria for location 
Complex 
Type New 
designation  Complex shall be developed fo r
companies’ immediate occupation 
 Occupation needs of FDI companies 
shall be clearly presented (at least in 
the form of an MOU) 
 FDI ratio should 
be not less than 
30% 
 FDI amount 
should be double 
the land price  
 Expansion of 
existing zones  An occupation contract of 3/4 or more 
of the designated zone shall be 
concluded 
 A complex subject to expansion shall 
be developed for companies’ 
immediate occupation 
 Occupation needs of FDI companies 
shall be clearly presented (at least in 
the form of an MOU) 
Individual Type  
(Manufacturing)  US$ 30 million or more of FDI  
 
2. Free Economic Zone  
 There is no specific condition to locate in FEZ, but there are eligibilities for any foreign-
invested company locating in FEZ to get tax benefits.  
Tax benefits 
Eligibility Details 
Minimum investment (USD) Manufacturing: $30 million Tourism: $20 million 
Logistics: $10 million R&D: $2 million 
 Seven-year tax holiday (national and local 
taxes) 
• No corporate, income, acquisition, registration 
or property taxes for up to five years; 
50 per cent discount for two years thereafter 
• Local governments may offer additional tax 
benefits (up to 15 years depending on local 
laws) 
Minimum investment (USD) 
Manufacturing: $10 million 
Tourism: $10 million Logistics: $5 million 
R&D: $1 million 
Medical institutions: $5 million Land/urban development: $30 million with 100 percent foreign capital, or $500 million with at least 50 per cent foreign capital Five-year tax holiday (national and local 
taxes) 
• No corporate, income, acquisition, registration 
or property taxes for up to three years, and 
50 per cent discount for two years thereafter 
• Local governments may offer additional tax 
benefits (up to 15 years depending on local 
laws) 
 
3. Free Trade Zone 
 In accordance with the Article 10 of the Ac t on Designation and Management of Free Trade 
Zones, to enter a Free Trade Zone, a company should be as follows: G/SCM/Q2/KOR/41 
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(i) manufacturing companies more than 50 per cent of which products are exported;  
(ii) foreign-invested companies more than 10 per cent of which are owned by foreign 
investor(s) and which have attracted more than 100 million KRW of foreign investment in Korea;  
(iii) wholesale- or logistics-related companies( without limitations) more than 50 per cent 
of which products are imported or exported . This criteria applies to both domestic and 
foreign companies.  
ENVIRONMENTAL IMPROVEMENT LOAN PROGRAM  
Question 1 
  Whether the loan is available for all firms that install and operate pollution prevention 
devices and facilities, including foreign firms or firms using imported equipment? Also clarify 
whether the loan is available only to domest ic enterprises and for use of domestically 
manufactured products? 
 Reply  
 
 Regardless of whether the corporation is fo reign or domestic, any men with business license 
in the jurisdiction of the Republic of Korea who wa nt to install or are in the process of installing 
environmental pollution prevention e quipment in his or her own busin ess are entitled to apply for  the 
loan.   The environmental pollution prevention equipm ent must be installed and used in domestic 
business, and since actual anti-pollution and pollution reduction effect should be made from the use of 
the equipment, the relevant equipment should be  appropriate for domestic circumstances.  
 
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